Consumer Proposal Pros and Cons in 2025: Is It Right?

Drowning in debt and searching for a lifeline? You’ve probably Googled every option under the sun like debt consolidation, credit counselling, maybe even bankruptcy. But there’s one solution that keeps popping up: the consumer proposal.

So, is a consumer proposal a good idea in 2025? It might be. But like any major financial move, it comes with trade-offs.

In this guide, we’re unpacking the consumer proposal pros and cons, so you can figure out whether it’s the fresh start you’ve been looking for.

Understanding Consumer Proposals in 2025

If you’re feeling buried under bills, a consumer proposal might be the debt relief solution that finally gives you room to breathe.

It’s a government-backed option that helps you avoid bankruptcy while cutting down your unsecured debt — sometimes by as much as 80%.

Here’s how it works: you team up with a Licensed Insolvency Trustee (LIT), who helps you create a realistic repayment plan based on what you can actually afford. Then they negotiate with your creditors on your behalf. If an agreement is reached, the remaining debt can be wiped away — including credit cards, payday loans, personal loans, and even tax debt.

However, some debts are typically excluded, such as certain student loans, child or spousal support arrears, and court-imposed fines.

Top Advantages of Consumer Proposals in 2025

There are many reasons why Canadians choose this route. Here are the key advantages of consumer proposals in 2025:

• Reduce your debt: You may only need to repay a portion of what you owe—sometimes as little as 20%.
• One affordable monthly payment: Payments are based on your budget and can be spread out over up to five years.
• Freeze interest charges: Once your proposal is filed, interest on your unsecured debts is typically stopped.
• Protect your assets: Unlike bankruptcy, you keep your home, car, and other personal belongings (as long as payments are current).
• Stop collection calls and wage garnishments: Legal protection begins once the proposal is filed. Creditors must stop calling, and legal actions (including wage garnishments) have to stop.
• Pay off early if you’re able: While the proposal term can last up to five years, you can complete it faster with early payments.
• Start rebuilding credit sooner: Yes, a consumer proposal can still impact your credit score, but it’s less damaging than filing bankruptcy.

Disadvantages of Consumer Proposals in 2025

While the pros are significant, there are also a few things to keep in mind. Here are the main disadvantages of consumer proposals:

• Impact on your credit: A consumer proposal will appear on your credit report and can lower your credit score. It typically stays on file for three years after your final payment.
• Costs: While LIT fees are regulated and built into your monthly payment, there are filing and other administration costs that are taken into account before the creditors receive their portion.
• Not all debts qualify: Only unsecured debts are eligible to be fully released in a consumer proposal. This includes credit cards, payday loans, and tax debt. Student loans less than seven years old and secured debts like mortgages or car loans are excluded.
• Strict repayment terms: If you miss a combined total of three-monthly payments, the proposal will be annulled, and creditors can resume collection efforts, as the protection afforded to you will be lifted. However, the repayment plan is designed to be affordable, and your LIT will work with you to avoid this outcome.
• May affect tax refunds: In most cases, a debtor in a consumer proposal will receive their tax refunds as usual. However, if you owe money to the Canada Revenue Agency (CRA), they may exercise their right of offset — meaning they can redirect refunds from prior years or up to the date of filing to cover outstanding tax debts.

Is a Consumer Proposal a Good Idea for You?

If you owe more than $10,000 in unsecured debt and can’t keep up with your payments, a consumer proposal might be worth looking into. It’s a way to lower what you owe and avoid going bankrupt—while still keeping your stuff.

This option can work well if you have a steady income and can handle fixed monthly payments. It can also stop those nonstop calls from creditors and help protect your paycheck from being taken.

Let’s look at the main pros and cons so you can figure out if this debt relief option makes sense for you.

Pros:

• Reduce your total debt by up to 80%
• One fixed, affordable monthly payment
• Stop interest on most debts
• Protect your home, car, and other assets
• Stop collection calls, wage garnishments, and legal actions
• Option to pay off early if your finances improve
• Rebuild credit faster than with bankruptcy

Cons:

• Consumer proposal stays on your credit report for three years after paying off the proposal
• Licensed Insolvency Trustee (LIT) and filing fees apply
• Only unsecured debts are eligible (e.g., credit cards, not mortgages or car loans)
• Missing payments can void the agreement
• May affect tax refunds during the proposal period

Farber’s Support for Consumer Proposals in 2025

Of course, the best way to find out if this is the right option is to speak with a professional.

At Farber, our Licensed Insolvency Trustees have helped over 200,000 Canadians since 1979 break free from debt and build stronger financial futures.

We’ll help you understand your options, answer your questions, and guide you through every step of the process: from filing to your final payment. Filing a consumer proposal doesn’t have to be stressful.

With the right support, it can be a powerful move toward financial freedom. Book your free consultation today and start your journey with confidence.

Need Help Weighing the Pros and Cons of a Consumer Proposal?

A consumer proposal can be a smart, practical way to deal with overwhelming debt — especially if you need to protect your assets and want a fresh start without going bankrupt.

Still, like any financial decision, it’s important to weigh the advantages of consumer proposals against the disadvantages of consumer proposals to see if it aligns with your goals and situation.

If you’re asking yourself, “Is a consumer proposal a good idea for me in 2025?” don’t guess: get advice from a licensed professional.

Contact Farber today for a free consultation and take the first step toward living debt-free.